Case Law Details
Draegerwerk AG & Co. KGAA Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that transfer pricing adjustment on account of guarantee commission income is unsustainable in terms of India-Germany DTAA.
Facts- The assessee is a German-based provider of medical technology. It develops, produces and markets system solutions, equipment and services for the optimization of processes at the acute point of care, such as emergency care preoperative care, critical care and prenatal care. During the year under consideration, the assessee has supplied equipment and rendered certain services, the activities of which were carried out outside India.
In addition, the assessee has provided corporate guarantee for a working capital term loan availed by its AE, Draeger India Private Limited (‘DIPL), from HSBC bank. The said guarantee is continuing in nature and the assessee has not charged its AE any fee/ commission during the year in this regard.
During the transfer pricing assessment proceedings, the TPO concluded that the corporate guarantee provided by the assessee to HSBC Bank, for the loan availed by DIPL, is an international transaction. The TPO concluded that commission from such corporate guarantee would be taxable in India in the hands of the assessee under Article 21 of DTAA between India and Germany.
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